Federal prosecutors today unsealed the indictment of three people and three companies in connection with a sprawling probe of more than $7 billion in suspicious money transfers from Russia through accounts at the Bank of New York.
The charges are the first to be brought in the year-old investigation. Prosecutors are trying to determine whether the vast sums of money -- which raced through the Bank of New York accounts to financial institutions throughout the United States and the world -- were the product of a sophisticated money-laundering operation, represented Russian capital flight and tax evasion, or stemmed from other illegal operations.
Although authorities are a long way from determining who sent the money -- or proving those transfers violated U.S. money-laundering laws -- they hope the charges announced today will spur some of the key figures to cooperate with the investigation.
"Many questions about the various sources of the monies flowing through the accounts at the Bank of New York remain to be answered," U.S. Attorney Mary Jo White said in a statement, adding that "the ongoing investigation is very intense and broad, and it is likely to go on for some time."
Authorities believe some of the money came from organized-crime groups and corrupt Russian officials. The Bank of New York has not been charged with any wrongdoing.
Named in the indictment are Lucy Edwards, a former bank vice president who was fired in August; her husband, Peter Berlin, a Russian native (and now U.S. citizen) who authorities believe is the central figure in the case; and Aleksey Volkov, a business associate of Berlin's. The document also names three companies -- Benex International Co., Becs International L.L.C. and Torfinex Corp. -- that sources said held the accounts that handled most of the transactions.
The indictment charges that Edwards, Berlin and Volkov "conspired to illegally transmit funds and receive deposits" through the Benex and Becs accounts, officials said. It also charges the individuals and the companies with conducting an "illegal money transmitting business," as well as with "engaging in an illegal banking operation" by receiving deposits without proper state or federal authorization, officials said.
T. Barry Kingham, a lawyer representing Edwards, Berlin, Benex and Becs, declined to comment on the indictment, saying "we will respond at the appropriate time and in the appropriate forum." The couple live in London, and federal law enforcement officials said it's not clear if they can be extradited for these charges.
Lawyer Michael G. Davies, who represents Volkov and Torfinex, said that both "deny having engaged in any wrongdoing whatsoever." Davies would not say where Volkov could be located. A lawyer who recently worked for Volkov, however, said he was in Russia.
The charges were filed under seal in federal court on Sept. 16. and only announced today. The indictment describes an alleged scheme in which Edwards helped Berlin and Volkov create companies and open accounts at the bank that were used to move enormous amounts of money.
In 1996 Berlin opened accounts in the name of Benex and Becs at a Bank of New York branch in lower Manhattan. His wife was a signatory with him on the Becs account, and Volkov was a signatory with Berlin on the Benex account.
From about February 1996 through July 1999, about $4.85 billion moved into the Benex account. During that same period, the Becs account received about $2 billion in deposits, according to the indictment. These deposits were made on almost a daily basis and then were transferred out within days to financial institutions around the world.
Torfinex, a company headed by Volkov, transferred the money under the direction of "individuals in Russia," the indictment said. "Typically, there were hundreds of wire transfers per day to and from the Benex and Becs accounts," the indictment said.
Authorities indicate that Edwards, the bank official, was not a passive bystander. The indictment alleges that in 1997 she once chided a Torfinex employee for "failing to execute certain wire transfers for Benex and Becs."
Edwards, like her husband a Russian emigre, started at the bank in 1988 and worked her way up from a job as a teller to a London-based posting as vice president of the bank's Eastern European branch. Company officials suspended her -- along with another executive -- in August when the investigation became public. Edwards was then fired for allegedly falsifying bank documents and violating internal policies. Bank Chairman Thomas A. Renyi acknowledged in testimony before Congress that bank officials did not pursue questions about her husband's activities because she was "well regarded."
The indictment also charges that the three knew what they were doing was illegal and ignored an order from the New York State Banking Department to cease transmitting money.
Lewis D. Schiliro, assistant director in charge of the FBI's New York field office, said that by unsealing the indictment, investigators also can now share information with counterparts overseas. That's essential now that much of the probe will focus on determining who in Russia sent money to the Bank of New York, he said. "We have to be able to share information with them," Schiliro said, adding that investigators are already working on the case with authorities in "a great many" countries. "This is the beginning of what we hope to be major inroads in this case."